PART I.
MULTIPLE CHOICE QUESTIONS (10 Items)
(Instructions: Select the best answer for each item. Cite the Article or case that
supports your answer.)
1.
D borrowed P10,000 from C under a written contract. After ten (10) years, D
voluntarily paid the debt. Can D later recover the amount paid on the ground
that the action for collection had already prescribed? [Art. 1144(1), 390]
A. Yes, because extinctive prescription renders the civil obligation non-existent.
B. Yes, because payment was made under a mistake of law and may be
recovered under solutio indebiti.
C. No, because the payment of a prescribed civil obligation is considered a
performance of a natural obligation, authorizing the retention of what has
been delivered. [Art. 1424, 390]
D. No, unless D proves that C made a fraudulent representation regarding the
prescription period.
2.
A contract of sale between S (seller) and B (buyer) contains a provision that
grants S the right to declare the contract cancelled and of no effect if B defaults
in paying installments. Does this stipulation violate the principle of mutuality of
contracts (Art. 1308)?
A. Yes, because the fulfillment of the contract is left solely to the will of S, the
vendor.
B. No, because S's power to cancel cannot be arbitrarily exercised without B
committing a breach of contract (non-payment); B can prevent cancellation
by complying with his obligation.
C. Yes, because the ultimate purpose of Article 1308 is to render void any
condition that makes fulfillment dependent exclusively upon the uncontrolled will
of one party.
D. No, because the contract, being one of sale, is already perfected, and the
cancellation clause is deemed a resolutory condition stipulated for the benefit of
the seller.
3.
L, a solidary debtor, paid the entire obligation after the prescriptive period had
lapsed. L now seeks reimbursement from his co-debtor, M. Is L entitled to
reimbursement?
A. Yes, provided that L pays before judicial demand is made by the creditor.
B. Yes, but L can only recover M's proportionate share, not the entire amount.
C. No, because payment made by a solidary debtor after the obligation has
prescribed does not entitle him to reimbursement from his co-debtors. [Art.
1218, 150, 238]
D. No, unless L can prove that M consented to the payment.
4.
Which of the following elements is not a requirement for the application of legal
compensation? [Art. 1279, 223]
A. Both debts consist in a sum of money.
B. Both debts are due and demandable.
C. Both debts are liquidated.
D. The debts must arise from the same contract or transaction.
5.
X owes Y P10,000. X binds himself to deliver Item A, or Item B, or Item C. Item B
is lost due to X’s negligence. The right of choice belongs to X. Which statement is
correct?
A. X is liable to Y for damages because the loss occurred due to his fault.
B. X must deliver the value of Item B, the thing lost due to his fault.
C. The obligation subsists, and X may still choose between Item A or Item
C, without liability for damages for the loss of Item B.
D. The loss of Item B extinguishes the entire obligation due to the fault of the
debtor.
6.
An obligation arises from an oral contract. How long is the prescriptive period
for filing an action to enforce this obligation?
A. Ten (10) years.
B. Four (4) years.
C. Six (6) years. [Art. 1145(1), 152]
D. One (1) year.
7.
A contract provides that X will pay Y P50,000 for building a fence, but payment
is due "when X's means permit him to do so." What is the nature of this
obligation?
A. It is a conditional obligation, void because its fulfillment depends on the
exclusive will of the debtor.
B. It is a pure obligation, immediately demandable.
C. It is an obligation with a period, the duration of which must be fixed by
the court if the parties cannot agree. [Art. 1180, 48]
D. It is a void obligation, as the uncertainty of payment is too great.
8.
In an action for resolution of a reciprocal obligation due to a party's breach
(Art. 1191), the court may deny resolution and authorize the fixing of a period
when there is:
A. Serious and fundamental breach by the obligor.
B. A stipulation for automatic rescission.
C. Just cause authorizing the fixing of a period. [Art. 1191, 72]
D. Unjust enrichment on the part of the injured party.
9.
Which statement correctly describes the nature of promissory notes and checks
as means of payment?
A. They are legal tender, and the creditor must accept them.
B. They extinguish the obligation upon delivery, provided they are certified.
C. They are not legal tender, and the creditor cannot be compelled to accept
them.
D. They extinguish the obligation when their value is impaired, regardless of the
creditor's fault.
10.
Estoppel by deed is a bar which precludes a party from asserting any right or
title in derogation of the deed. A void deed:
A. Creates a strong presumption of estoppel against the signee.
B. Will not work, and may not be the basis of an estoppel.
C. Is validated by the parties’ acceptance of benefits.
D. Is subject only to the doctrine of laches, not estoppel.
PART II. HYPOTHETICAL BAR QUESTIONS (10 Items)
(Instructions: Answer briefly, basing your response on the legal principles and
cases cited in the source materials.)
Question 1: Tender of Payment (Case: Soco vs. Militante / Asturias Sugar
Central vs. Pure Cane Molasses Co. )
Atty. G, a debtor, tendered payment to C, his creditor. C refused the tender
without justifiable reason. G decided to consign the amount in court but failed to
notify all persons interested in the fulfillment of the obligation, including the
surety, believing that only the principal creditor needed notice. Is the obligation
extinguished? Explain the requisite of consignation that G failed to comply with.
Answer: No, the obligation is not extinguished. For consignation to be valid and
effectual, there must be strict compliance with all essential requisites [Soco vs.
Militante, 1983]. G failed to comply with the requisite of previous notice of
consignation to persons interested in the fulfillment of the obligation [198(3)].
The law requires notice to all interested parties (including the surety). The failure
to notify all interested parties, including the surety, is fatal to the consignation.
G's obligation is not a case where consignation is unnecessary (like the exercise
of a right or privilege, such as in Asturias Sugar Central) but one for the
discharge of an existing debt.
Question 2: Novation and Criminal Liability (Case: Unidentified Estafa Case)
A, an agent, failed to remit the cash value of diamond rings sold on commission
and was subsequently sued for estafa. During the pendency of the criminal case,
A executed a deed promising to pay the value of the rings in installments, and P
(principal) accepted one partial payment. A now argues that the acceptance of
payment and the installment deed novated the original obligation, thereby
obliterating her criminal liability. Is A correct?
Answer: No, A is incorrect. Novation is not presumed; it must be clearly shown.
The execution of the installment agreement and the acceptance of partial
payment do not automatically extinguish the original obligation by novation,
as the primary objective of the creditor (P) may be merely to recover the money
owed. Furthermore, even if the civil obligation arising from the crime were
novated, this does not extinguish the criminal liability of A for the crime
already committed, as criminal liability is governed by law and not by
stipulations of the parties.
Question 3: Right to Rescission and Mortgage (Case: Suria vs. Intermediate
Appellate Court )
R, a vendor, sold a parcel of land to E, the vendee. E failed to pay the agreed
installments, but the sale was already perfected and ownership transferred to E,
secured by a mortgage in favor of R. E defaulted. R filed a complaint seeking the
rescission (resolution) of the contract of sale under Article 1191. Should the action
prosper?
Answer: No, the action for rescission under Article 1191 should not prosper. Once
the contract of sale is perfected and consummated (i.e., ownership transferred
and secured by a mortgage), the relationship between the parties is no longer
primarily one of buyer and seller, but one of mortgagor and mortgagee. The
breach is not of the contract of sale but of the obligations created by the
mortgage contract. Since foreclosure is a remedy specifically provided in the
contract and by law, the remedy of rescission is deemed subsidiary and is not
available in the absence of any other legal remedy.
Question 4: Estoppel on Jurisdiction (Case: Tijam vs. Sibonghanoy )
X filed a case against Y in a court that lacked subject matter jurisdiction. Y
actively participated in the proceedings for several years, seeking affirmative
reliefs and filing motions, before receiving an adverse ruling. Y now assails the
jurisdiction of the court on appeal. Should the doctrine of estoppel be applied
against Y?
Answer: Yes, the doctrine of estoppel should be applied against Y. While the
general rule is that jurisdiction may be assailed at any stage (as jurisdiction is
conferred by law), the Supreme Court has ruled that a party's active
participation in the proceedings before a court without jurisdiction, especially
after invoking it to secure affirmative relief and waiting for an adverse decision,
may estop such party from later assailing that jurisdiction. This rule is an
exception justified by highly meritorious and exceptional circumstances, aimed
at preventing a mockery of the tenets of fair play.
Question 5: Penalty Clause and Damages (Case: Po Pauco vs. Siguenza and
Aguilar )
In a contract, D failed to comply with his obligation. C successfully sought
judicial resolution of the contract, and the court simultaneously awarded C the
stipulated penalty, including interest and attorney’s fees. Was the allowance of
the full stipulated interest and attorney’s fees proper, given that the contract
was resolved?
Answer: No, the allowance of the full stipulated interest and attorney’s fees
was not proper. When resolution (rescission under Art. 1191) is granted, it
abrogates the contract in all its parts, rendering it inexistent from inception. The
party seeking resolution cannot have performance as to part and resolution
as to the remainder. Upon resolution, the sole duty incumbent upon the debtors
is mutual restitution (to restore what they have received with legal interest from
the date the benefits were conferred), and C can no longer rely on stipulations
regarding interest and attorney’s fees which were based on the resolved
contract.
Question 6: Mutual Negligence in Reciprocal Obligations (Case: Rodzssen
Supply, Inc. vs. Far East Bank & Trust Co. )
In a reciprocal obligation involving S and B, both parties were found to be
mutually negligent in the performance of their respective duties, leading to the
breach of the contract. How should their rights and obligations be determined?
Answer: When both parties to a transaction are mutually negligent in the
performance of their obligations, the fault of one cancels the negligence of the
other. Consequently, their rights and obligations should be determined
equitably under the law, often prescribing unjust enrichment, as no one shall
enrich himself at the expense of another.
Question 7: Estoppel and Illegal Contracts (Case: Manila Lodge No. 763 vs.
Court of Appeals )
A Municipal Corporation (MC) illegally sold public property (reclaimed land) to a
private entity (P), which accepted the benefits of the sale. MC later questioned
the sale’s validity, claiming it had no power to make such a contract. P argues
that MC is estopped because it accepted the benefits and the transaction was
documented. Is MC estopped?
Answer: No, MC is not estopped. Estoppel cannot be applied to validate a
contract which a municipal corporation has no power to make, even if it has
accepted the benefits thereof. To apply the doctrine in such a case would enable
MC to do indirectly what it cannot do directly. Validity cannot be given to a
contract by estoppel if it is prohibited by law or is against public policy.
Question 8: Passive Novation (Case: Reyes vs. Court of Appeals )
D owes C P50,000. X, a third person, agrees to assume D's obligation, and X
immediately starts making installment payments to C, which C accepts. D,
however, was never expressly released by C. Does the substitution of X constitute
an extinctive novation, releasing D from the debt?
Answer: No, there is no extinctive novation, and D is not released from the
debt. The mere circumstance of the creditor (C) receiving payment from a third
party (X) who acquiesced to assume the obligation, where there is clearly no
agreement to release the debtor (D) from her responsibility, does not constitute
novation. In substitution of the debtor (passive novation), the old debtor must
be expressly released. X merely becomes a co-debtor or surety, and the
accessory obligations are not extinguished.
Question 9: Compensation and Unliquidated Claim (Case: Miailhe vs. Halili )
C owes D P2,000 based on a final judgment. D owes C P2,000 based on a
judgment still pending appeal. C retains the P2,000 awarded to D, claiming
compensation took place by operation of law. Was C's action correct?
Answer: No, C’s action was incorrect because compensation has not legally
taken place. One of the essential requisites for legal compensation is that both
debts must be liquidated and demandable [Art. 1279(4)]. Since the debt D owes
C is still the subject of court litigation and appeal, it is considered an
unliquidated claim, and therefore, cannot be subject to compensation.
Question 10: Promissory Estoppel (Case: Ramos vs. Central Bank )
The Central Bank (CB) imposed several conditions for the rehabilitation of OBM
(a private bank), which OBM complied with in good faith. CB then decided to
liquidate OBM instead of proceeding with the rehabilitation, arguing that
promises of future conduct do not constitute estoppel. May CB be barred from
liquidation?
Answer: Yes, CB may be barred from proceeding with the liquidation based on
the rule of promissory estoppel. This doctrine applies when a party (CB) may
not renege on its promises after the other party (OBM) had complied with the
former’s conditions, causing OBM to suffer detriment by relying on those
promises. The CB's conduct revealed a calculated attempt to evade
rehabilitation despite its promises, violating the principles of good faith and
binding contracts (Arts. 1159 and 1315).